Hunton Retail Law Resource

This past week, the following regulatory and consumer actions made headlines:

Cheez-It Whole Grain Crackers ‘Not Ready,’ lawsuit claims

The Kellogg Company is being sued over its “whole grain” Cheez-It crackers. According to the complaint filed in U.S. District Court for the Eastern District of New York, the claim that these crackers are whole grain is “false and misleading, because the primary ingredient in Cheez-It Whole Grain crackers is enriched white flour.”

While the Cheez-It Whole Grain crackers do contain some whole wheat flour, plaintiffs argue it is almost negligible. A comparison of the Cheez-It Original crackers and the Cheez-It Whole Grain crackers shows identical nutritional values in every category, except fiber. The Original crackers contain “less than 1g,” while the Whole Grain crackers contain 1 gram.

Plaintiffs argue the Cheez-It claims are thus misleading, and have caused consumers to purchase or pay a premium for a product, that they otherwise would not have paid. The Kellogg Company has denied any misconduct, including any alleged impropriety in its labeling.

FTC Settles Amberen Dietary Supplement/Weight-Loss Suit

Lunada Biomedical, Inc., the makers of Amberen, have settled with the FTC over allegations of deceptive marketing of Amberen, a dietary supplement, that was alleged to benefit women seeking to lose weight and provide menopause relief.

The stipulated order entered into by Lunada Biomedical and the FTC bars the company and its principals from making unsubstantiated claims for any dietary supplement or food, or engaging in any illegal conduct related to consumer satisfaction claims, “risk free trial” offers and consumer endorsements.

Specifically, the stipulated order prevents the defendants from: (1) making misleading or unsubstantiated claims related to a dietary supplement, food or drug allegedly causing weight loss or loss of belly fat; (2) making misleading or unsubstantiated claims relating to boosting metabolism, relieving hot flashes, night sweats or other symptoms of menopause; (3) making any misleading or unsubstantiated claim about the health benefits of any dietary supplement, food or drug; (4) misrepresenting the results of any test of a product; (5) misrepresenting any material fact about any product or any material terms and conditions of any offer for a product; and (6) failing to disclose any financial incentives provided to product endorsers. Lunda Biomedical is also subject to a $40 million fined judgment, but all but $250,000 is suspended based on the defendants’ inability to pay.

FTC Settles LearningRX ‘Brain Training’ Claims

The FTC has settled its complaint against the makers and marketers of LearningRX over its “brain training” programs. The FTC’s complaint had alleged that LearningRX and its CEO made deceptive and unsubstantiated claims that that their “brain training” programs were clinically proven to permanently improve serious health conditions like ADHD, autism, dementia, Alzheimer’s disease, strokes and concussions. Further, the FTC alleged that defendants claimed these programs substantially improved school grades and college admission test scores, career earnings, job performance and athletic performance.

Under the proposed order, defendants are prohibited from claiming their programs improve performance or the cognitive function of individuals with age-related or other health conditions, unless the claims are substantiated by human clinical testing and not otherwise misleading. The order also prohibits defendants from misrepresenting the existence or results of any tests or studies. The company is also required to pay a $4 million judgment, with all but $200,000 suspended.

Starbucks, Kraft Foods Tassimo Pod Suit Dismissal Affirmed by Sixth Circuit

In Montgomery v. Kraft Foods Global, Inc., et al., a unanimous three-judge panel in the U.S. Court of Appeals for the Sixth Circuit upheld the dismissal of warranty claims and denial of class certification to a group of at-home baristas who filed a $5 million suit against Kraft Foods and Starbucks, claiming the defendants misled them into thinking they could use their Tassimo coffeemakers to brew Starbucks-brand coffee.

The appeals court ruled that the trial court did not err in dismissing plaintiff’s claim that defendants breached warranty when Starbucks single-cup coffee pods compatible with Kraft’s Tassimo brewer were no longer available after the parties ended their business relationship. The plaintiff had alleged that the companies misled customers by making it appear as if the companies were still associated in 2012, and that the plaintiff had relied on this misrepresentation when she purchased a Kraft Tassimo coffee machine.

The court found that dismissal of the express warranty claim was proper since the plaintiff failed to plead she had a contractual relationship with the companies as required under Michigan law, where the lawsuit was filed.

According to the Sixth Circuit’s decision, “To properly plead a breach-of-express-warranty claim then, [plaintiff] needed to allege that she was in privity with defendants…She didn’t; her complaint acknowledged that she bought her Tassimo from a Fred Meijer grocery store, not directly from defendants.” The plaintiff’s other claims also failed for a variety of reasons, including the plaintiff did not allege that at the time she purchased the coffee maker, the products were already incompatible.

Finally, the Sixth Circuit found the plaintiff’s class certification request was mooted when she accepted the defendants’ offer of judgment, which included costs and attorneys’ fees.

FTC Issues More Than Three Dozen Warning Letters Related to Eyeglass Rule

The FTC staff sent 38 letters to eyeglass prescribers, warning them of potential compliance violations of the agency’s Ophthalmic Practice Rules (“Eyeglass Rule”), which gives consumers the right to comparison shop for prescription eyeglasses.

The letters sent warn the prescribers that violating the Eyeglass Rule can result in civil penalties of up to $16,000 per violation and provided potential violators with a copy of the Eyeglass Rule and the FTC’s guidance document, Complying with the Eyeglass Rule.

Under the Eyeglass Rule, eyeglass prescribers must provide patients with a copy of their eyeglass prescription immediately after an eye exam, regardless of whether it is requested by the patient. In addition, prescribers are prohibited from requiring its patients to buy eyeglasses from them as a condition of providing them with a copy of their prescription.

According to the FTC, “[t]he Rule further states that prescribers cannot provide a notice of liability waiver, require patients to sign a liability waiver, or require patients to pay an additional fee in exchange for their prescription. Prescribers also cannot condition performance of an eye exam on the patient’s agreement to buy eyeglasses, contact lenses, or other ophthalmic goods from them.”

FTC Issues Proposed Amendments Related to E-Warranty Act – Seeks Comments

The FTC has issued proposed amendments to the E-Warranty Act, and specifically the Disclosure Rule and Pre-Sale Availability Rules. The Disclosure rule requires written warranties on products that cost more than $15, as well as its Pre-Sale Availability Rules, which detail the methods by which warrantors and sellers must provide warranty terms before a sale. The FTC is seeking public comment on these proposed amendments.

Under the proposed amended rules, which were approved in a 3-0 vote by the FTC,  warrantors could comply with the law by posting warranty terms online, as long as the warrantor also provides consumers with a non-Internet based method to obtain warranty terms. The proposed amendment would also allow certain sellers to use electronic methods to provide consumers with warranty terms pre-sale.

Interested parties may provide comment through June 17, 2016, and all public comments received can be found here.